FERC said in the NOPR that it hopes to remove barriers to
the participation of energy
storage resources and distributed energy resource aggregations in the
capacity, energy, and ancillary service markets of TSOs.

As part of the NOPR, TSOs would also define distributed
energy resource aggregators as a type of market participant that can
participate in the organized wholesale electric markets under a model that best
accommodates the physical and operational characteristics of distributed energy
resource aggregation.

FERC said that TSOs currently establish the participation
models for different types of resources, but some models place limitations on
the services that some resources can provide. For example, stored energy
resources are only allowed to provide regulation service in certain TSO
territories, and some energy storage resources participate as demand response
because, absent appropriate participation models, demand response most closely
resembles the manner in which energy storage could participate in markets.

Comments on the NOPR will be due 60 days after publication
of the proposed rule in the Federal Register.

Stakeholder Insight

During a Nov.
9 technical conference on utilization of energy storage as
transmission assets, some stakeholders expressed concerns about creating unique
mechanisms for energy storage in markets.

A representative of the California Independent System
Operator (CAISO) on Nov. 9 told FERC that, in CAISO’s experience, energy
storage more effectively fits within the framework of market resources
providing local capacity than as transmission assets.

In a statement to FERC, CAISO Executive Director,
Infrastructure Development, Neil Millar said that CAISO has studied a number of
potential electric storage projects as reliability solutions, ranging from
transmission asset models to local resources participating in markets.

“The former has not resulted in energy storage transmission
assets moving forward, whereas the latter has resulted in a number of energy
storage projects providing local capacity,” Millar said.

Millar said that, to the extent that TSOs have developed
models for energy storage to participate in energy and ancillary services
markets, exploring a separate mechanism to compensate energy storage resources
for these services could distort efficient market outcomes.

PJM Interconnection, in its statement to FERC for the
technical conference, said that the question of whether energy storage can be considered
a transmission asset requires “careful consideration” of the overall market
opportunities provided to all resources, and whether there are particular
“niche” applications where energy storage can provide a more cost-effective
solution than new transmission or system upgrades.

PJM said that FERC should not “bend the market design” to
give energy storage, or any technology, a competitive edge.

To date, PJM has incorporated more than 300 MW of emerging
energy storage resources, such as batteries and flywheels, into its ancillary
service markets, according to the statement.

FirstLight Power Resources, an owner of hydroelectric and
pumped storage hydro facilities in the U.S. Northeast, agrees with PJM’s
estimation that all energy storage resources should participate on a “level
playing field” in the wholesale market.

Tom Kaslow, policy director for FirstLight, said in a
statement to FERC that, while all existing and new energy storage resources can
be operated in a way that “mimics a wholesale transmission function,” this
single aspect of service does not warrant compensation as a transmission asset.

Compressed air energy storage (CAES) developer WindSoHy told
FERC that current regulations have effectively prohibited the development of
CAES projects.

“CAES is an incredibly flexible energy storage technology
that blurs the lines between generation and transmission/distribution,”
WindSoHy CEO Joe Spease said. “Therefore, it is important for FERC to update
the energy market regulations related to energy storage before we can take full
advantage of the capabilities of CAES.”

Since CAES can act like a generator and a transmitter, under
the current market design, CAES developers must choose between participating
solely as a generator providing energy for the organized wholesale markets, or
solely as a transmitter that receives cost-based returns through an open access
transmission tariff.

Spease said, in this way, FERC is preventing CAES from
realizing the full value potential of its abilities, and delaying needed
investment for the growth of the wind and solar industries.

FERC said in its NOPR that it is taking action in the
proposed rule so that electric resources will be able to participate in markets
to the extent they are technically capable of doing based on rules that take
into account their unique characteristics and not based on market rules
designed for the unique characteristics of other types of resources.